Consignment supply chain cooperation for complementary products under online to offline business mode

Abstract

The purpose of this paper is to explore the cooperation issues in a consignment supply chain with complementary products under Online to Offline Business Mode (O2O mode). The centralized, decentralized and cooperative game-theoretic decision models are developed, analyzed and compared for a generic consignment supply chain with complementary products under O2O mode. Similar models are also developed for that under pure online- and offline-channel modes for comparison purpose. The corresponding numerical and sensitivity analyses are conducted to validate the analytical findings and derive managerial insights. It is found that the cooperative strategy always creates many more profits for the supply chain by setting a much lower retail price and generating much more demands than those of the decentralized strategies. The best supply chain strategy for a consignment supply chain with complementary products sold through both online and offline channels is identified as the cooperative strategy. An extensive sensitivity analysis of seven key parameters on an O2O cooperative decision model has derived several insightful findings for the O2O consignment supply chain practitioners with complementary products. These managerial insights will facilitate better decision-making for the O2O retailers and their complementary suppliers. Since the cooperation of a consignment supply chain under O2O mode with complementary products is a fresh research domain, there are more research issues to be explored.